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Tech Stocks Continue to Diverge

In the past few weeks we have witnessed a marked change in leadership for the overall stock market, with Technology stocks, which were the previous leaders, weakening significantly. As evidence of this, we have seen the tech-heavy NASDAQ Composite Index trending lower, while the Dow and S&P 500 have maintained their strength. I have written about the FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) – these stocks have been the key leadership within the tech sector, and they are now trending lower, leading tech lower.

Although it is possible that another sector will pick-up the baton and assume a leadership role for the overall market to take it to new highs, I think this is unlikely. I do not see the stock market continuing to drive higher without technology participating and leading that charge. My expectation would be for tech to continue to trend lower, and for the broader stock market to roll over and pivot into a correction, with the magnitude of that correction being a minimum of 10%, but more likely 15% to 20%+.

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